Abstract
Over the past years, education attainment has increased at an unprecedented rate in Great Britain. We analyze how the education expansion affected inequality in household net incomes since the early 2000s. We show that, all else being equal, education composition changes led to higher living standards mostly through higher wages. As education expansion led to larger income gains in the middle and top than at the bottom of the distribution, income inequality increased. Despite the increasing share of high‐educated workers, we find limited evidence of a “compression” effect on inequality, as the higher education wage premium remained broadly unchanged.
Highlights
Over the past years, there has been an unprecedented increase in education attainment in Great Britain
In the second part of the section, we analyze how much of the income changes along the distribution were attributed to changes to population characteristics and market incomes (PCMI) and its components—in particular education changes—and to changes to tax-benefit policies (TBP)
In the final part of the section, we look at the contribution of education changes to changes in aggregate measures of income inequality
Summary
There has been an unprecedented increase in education attainment in Great Britain. The share of individuals completing full-time education aged 16 fell by 37 percent between 2001 and 2017; whilst the share of individuals completing education aged 17–19 (beyond compulsory education) increased by 47 percent and the share of those completing education aged 20+ (in Higher Education) increased for women by 66 percent and for men by 49 percent (Table 1) These large structural changes in education have important consequences for income inequality. I make use of micro-data from the Family Resources Survey made available by the Department of Work and Pensions via the UK Data Service. The results and their interpretation are my own responsibility
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